Shady: HSBC escaped with a fine of £1.2billion for money laundering back in 2012

HSBC has been caught up in another row over the world's giant banks, as a new report claims that it escaped censure for money laundering as it was 'too big to jail'.

Among the report's claims are the suggestion that Britain's Chancellor George Osborne warned against prosecuting HSBC to a level that could have even seen it lose its right to business in the US.

So how did HSBC, a UK-based but global bank, end up caught in yet another controversy? We explain.

What are the HSBC allegations?

Officials failed to prosecute HSBC for money laundering in 2012 over fears it would cause a global financial disaster, a congressional report has revealed.

The 228-page report claims the UK's Financial Services Authority and Chancellor George Osborne added to the pressure by warning it could lead to market turmoil.

The bank was not charged over allegations that it let drug cartels use US banks to launder funds and was instead fined £1.2billion by the authorities in 2012 in a settlement.

What is George Osborne said to have done?

The report titled, 'Too big to jail: Inside the Obama Justice Department's decision not to hold Wall Street accountable', names Osborne as having intervened in the investigation by sending a letter in September 2012 to the chairman of the Federal Reserve at the time Ben Bernanke and Timothy Geithner, the then-treasury secretary.

It said: 'Chancellor Osborne insinuated in his letter of September 10th that the US was unfairly targeting UK banks by seeking settlements that were significantly higher than 'comparable' settlements with US banks.'

The report was written by Republican staff of the committee on financial services in the US House of Representatives, which is chaired by Republican Jeb Hensarling.

It also accuses former US Attorney General Eric Holder of misleading Congress about the decision.

It said Holder ignored the recommendations of more junior staff to prosecute HSBC because of the bank's 'systemic importance' to the financial markets.

The report continued: 'Rather than lacking adequate evidence to prove HSBC's criminal conduct, internal Treasury documents show that Department of Justice leadership declined to pursue the Asset Forfeiture and Money Laundering Section recommendation to prosecute HSBC because senior Department of Justice leaders were concerned that prosecuting the bank 'could result in a global financial disaster' - as the FSA repeatedly warned.'

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Should the UK have stepped in to try and help HSBC?

While HSBC is essentially a global bank, it has its headquarters in London and until recently when it made a commitment to remain there, the threat of it moving its base overseas has been ever present.

The report claims the Chancellor and then financial regulator the FSA put pressure on the US not to prosecute HSBC.

If HSBC had been found guilty of the potential charges, the US government would have been required to review and possibly revoke its charter to do business in the US.

The FSA repeatedly warned that even the threat of possible charter withdrawal could have caused a fresh global financial crisis.

In the executive summary, the Too Big to Jail report says: 'The involvement of the United Kingdom's Financial Services Authority in the US government's investigations and enforcement actions relating to HSBC, a British-domiciled institution, appears to have hampered the US government's investigations and influenced DOJ's decision not to prosecute HSBC.'

However Justice Department spokesman Peter Carr said it was standard practice to seek input on the impact of prosecutions from subject-matter experts, 'such as domestic and foreign regulators.'

Carr added that a series of factors are weighed when determining how to resolve a case, including 'adverse consequences for innocent third parties, such as employees, customers, investors, pension holders and the public.'

He confirmed that US District Judge John Gleeson approved the agreement.

Politicians and others have lined up to criticise the Justice Department for not sufficiently cracking down on big banks following the 2008 financial crisis

Why was this investigation launched?

The report has sought to shed light on the department's internal decision-making, but it stopped short of making specific recommendations.

Concerns remain over the size and reach of the world's giant banks, long after the financial crisis when authorities vowed to end the situation where financial institutions could be considered too big to fail.

US District Judge John Gleeson approved the settlement with HSBC

The 2012 settlement detailed how Mexico's Sinaloa drug cartel and Colombia's Norte del Valle cartel laundered $881million through HSBC and a Mexican unit and how the bank violated US sanctions laws by doing business with customers in Iran, Libya, Sudan, Burma and Cuba.

Internal emails cited in the report show the Justice Department's Asset Forfeiture and Money Laundering Section, represented by then-chief Jennifer Shasky Calvery, was 'considering seeking a guilty plea from HSBC' as early as September 2012.

But senior leadership at the Justice Department, including Holder, ultimately overruled criminally charging the bank, even though he had testified in front of Congress that 'banks are not too big to jail.'

HSBC and The Treasury Department have declined to comment on the report.

Bank of England governor Mark Carney told MPs in a Treasury Select Committee hearing today that he was not involved in or aware of any alleged intervention in the HSBC case.

He said: 'Central banking authorities, when there are serious cases of misconduct, consult with their foreign peers to discuss the financial stability implications.'

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